Afterpay, OpenPay and Klarna change “potentially unfair and unclear terms” for UK customers

Afterpay bnpl

Source: AAP/Derek Rose.

A group of buy-now, pay-later (BNPL) providers have agreed to update their contract terms in the UK, following close scrutiny from the Financial Conduct Authority (FCA).

The four operators include Clearpay — the UK arm of Aussie giant Afterpay — as well as Aussie-grown OpenPay, NZ player Laybuy and European firm Klarna, which counts Commonwealth Bank among its investors.

The providers have agreed to make changes to address “potentially unfair and unclear terms” in their contracts in the UK market, a statement from the FCA said.

Even though BNPL products are not regulated in the UK, the FCA assessed the ‘fairness and transparency’ of the contract terms under the Consumer Rights Act.

The companies will change terms relating to issues such as contract cancellation and continuous payment, making them easier to understand and generally fairer to consumers.

The companies have also agreed to voluntarily refund customers who have been charged late fees in some specific circumstances — namely when they have cancelled their purchase.

Use of BNPL products almost quadrupled in the UK in 2020, and the government is supposedly preparing to bring in new laws that would bring BNPL players under FCA regulation.

“We do not yet have powers to regulate these firms,” Sheldon Mills, executive director of consumers and competition at the FCA, said in a statement.

“But we do have powers to review the terms and conditions of consumer contracts for fairness, and have acted proactively to ensure that the BNPL industry adopts high standards in their terms and conditions.”

Setting a precedent for BNPL?

While on the other side the world, this case could set a precedent for other markets, including Australia.

The question around whether BNPL businesses should face more regulatory scrutiny has been up in the air here for some years.

While industry players have committed to a code of practice, in what was hailed as a win for fintech self-regulation, there are still challenges around controversial no-surcharge rules for businesses, as well as ongoing concerns about whether BNPL services are actually good for consumers.

According to a January survey from, 25% of Aussies had an outstanding BNPL balance after Christmas. The average debt was $391.56.

Some 27% of BNPL users said they have paid a late fee.

It’s becoming clear that regulation is looming. Last year, Treasurer Josh Frydenberg unveiled plans to overhaul payments regulation in Australia, with a focus on BNPL as well as digital wallets and cryptocurrencies.

While the decision from the FCA in the UK may not have direct ramifications Down Under, it may well shine a fresh light on BNPL practices in Australia, and all over the world.


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